Bid Interest In ECB QE Sterilization Surges To Second All Time High, 1.5 Bid To Cover In Fixed Term Deposit Auction
After last week the world saw a failed auction in the ECB's Fixed Term Operations which further spooked investors to pull away from an increasingly unstable Europe, the ECB seems to have come down with an iron fist on participating banks. With just 45 participating banks submitting bids for under €32 billion of the €55 billion on auction last week, or a 0.6 Bid To Cover, this week the bidding banks surged to 88, bidding a massive €87.4 billion for this week's €59 billion of Fixed Term Deposits intended to sterilize running Eurozone government bonds. The result was a bid to cover of 1.5x: at the current rate of €4 billion acquired each week, the ECB will be hard pressed to find marginal buyers in as little as 5 weeks when the running sterilization total passes €80 billion, and the average of all auctions is just over €82.5. This includes the outlier first auction. Yet not everything was good news: the weighted average allotment rate was 0.56% compared to last week's 0.54%. The marginal rate was 0.75% and the minimum rate was 0.29%, compared to last week's 1% and 0.25%. The ECB continues to pay up more and more to stimulate interest in having to do outright QE as opposed to this sterilization charade. And as confirmation that the liquidity is once again strained on average, the use of the ECB's deposit facility jumped from €232 billion to €246 billion overnight, even post the July 1 reset from €309 billion to €213 billion.
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